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10/01/2007

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Jack

WalMart passes on the cost savings to customers.


aaaaaaaaaaaaa And has one of the fattest bottom lines in history. They run these stores with VERY few staff relative to the amount of goods sold and would not be hurt by paying wages on par with what is paid by Costco. (More? What is the effect of having the profits pumped out of your town and stockpiled in Bentonville or the Cayman Islands? Can you run your town on the backs of $10 neighbors?)

We live in a society were the returns to skilled workers is very high.

Unions are a cartel that raise prices and reduce output from competitive levels. Society gets a lower standard of living as we pay more for less output.

aaaaaaaaaaaaa Overly simplistic and wrong. Please review the interesting posts here.

Robotics have not worked well at GM. GM tried to replace people with robots because high wage union contracts blocked sensible more cost effective solutions.

aaaaaaaaaaaa Please document. HOW have they gotten the number of man-hours per car down to 30? Why is downsizing the number of workers ALWAYS an issue for Detroit? Even they are building FAR more cars per year than in the past.

Working people do gain from high productivity, the increased purchasing power of their paycheck and a higher standard of living.

aaaaaaaaaa Well, AS DISCUSSED here, SOME gain from the higher productivity. Let's see, Detroit has had great gains in productivity and with unions, working guys are getting some piece of it while producing a car for about the same price (in terms of weeks worked to buy it) as in years past.

Walmart, to its credit is VERY productive and yet, sans unions over a billion bucks of their labor costs are borne by tax payers via Earned income, subsidized housing, food stamps and other transfer programs designed for the poor.

Meanwhile farming and other industries have made great strides in productivity but, again, skilled farm-hands are sent packing to join the ranks of "unskilled" job seekers.

Lastly, as Corey too seems to wonder: If we've averaged 3% in year over year productivity gains over the last 40 years where did the 200% plus in gains go? While "to the consumer" might be an answer in electronics, it's surely not the case for cars, food, or other mfg goods.

Jack

Richard: Why would anyone be laid off after a strike? Because the company doesn't want higher payroll costs if there is a wage increase?

Does that mean that prior to the strike and raise the company was inefficiently allowing feather bedding? ie if it took a thousand employees before the strike to do the work, who will do the work after the strike? If your answer is "more labor saving technology" I say GREAT! as the jobs building automated equipment are typically more productive and pay higher than do the "lost" jobs of manual work.

BTW I think that one of the most important things for the US right now is a quantum leap in productivity or efficiency. Despite all the talk of "info tech" it seems that most of our family budgets go to the traditional areas of housing, cars, medical care, food, clothing and a bit of travel and entertainment. Yet not many people are employed in these areas; what are the rest doing?

DanC

Jack
I will go slow since you seem to lack even the most basic understanding of economics.

The big three have some monopoly power that allows them to earn monopoly profits. The UAW is able to extract some of these monopoly profits in labor contracts.

Competition increases in the auto industry. The big three must find ways to increase the productivity of workers because the former monopoly profits are gone but they are still paying monopoly wages.

Consumers are being offered products that are safer, higher quality, more fuel efficient, etc.

Wages are a function of the marginal productivity of labor and the cost of capital. They are not just numbers that pop into an employers head.

In order to pay the high labor costs that the new more competitive industry can no longer support, the big three must increase productivity, reduce unprofitable product lines, merge with other companies, or go out of business.

If the workers do not increase their productivity to come into balance with their wages, or accept wage reductions, the employer will reduce investments in the business and continue to operate as long as the prices they receive are above the average variable cost of production. Once prices fall below that level the employer will stop production.

GM Robotics history has been very mixed. I remember walking into a plant, not GM, but with a UAW workforce. The first thing that you see is a robot that picks parts on command. When an engineer asked me what I thought of it, I commented that it only made sense as an FU to the UAW. I could have hired two people with a forklift to do the same job quicker and easier.

GM is full of such examples. Machines that have a mixed record on things like installing windshields or tires. And BTW, Toyota has historically used fewer robotics then GM. Which company do you think is building better products on a consistent basis?

Corey

"Yet not many people are employed in these areas; what are the rest doing?"

Struggling to get by in a world that is changing faster than they can keep up with, and wondering why the taxes they paid to the government all those years didn't buy them some protection from the harsh effects of capitalism that you refuse to take seriously.

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